Henry CK Liu on debt forgiveness

[don]

But for whom. Henry at his most Hudson-esque....

Today, in 2010, as predatory capitalism hits its own home base, it is possible that a new world economic order will soon emerge from people power. Unfortunately, all governments are still fixated on "recovery" schemes concocted to turn the crisis back to the very same flawed system of moral depravity that had led the world to its present disastrous state.

Much of the talk now among establishment economists has been focused on technical debate on the government stimulus packages being too small to kick-start the seriously impaired economies around the world, when the problem has been that good public money has been targeted for bailing out undeserving private institutions to enable them to again play the same immoral game of recklessly speculation through "carry trade", risking the people's money for unproductive, obscene private profit, while leaving a dispirited population unemployed and underemployed, with families with young children facing homelessness.

If only a fraction of the people's money is spend directly on the people themselves, the world will emerge with a new economic order of moral justice instead of deprivation.

Ron Paul, the Republican congressman from Texas, told Federal Reserve chairman Ben Bernanke in a hearing that the Federal Reserve is a "predatory lender". But he did not mention that by law, predatory lenders forfeit any right of collection.

In the United States, although predatory lending is not defined by federal law, and various states define abusive lending differently, it usually involves practices that strip equity away from a homeowner, or equity from a company, or condemn the debtor into perpetual indenture.

Predatory or abusive lending practices can include making a loan to a borrower without regard to the borrower's ability to repay, repeatedly refinancing a loan within a short period of time and charging high points and fees with each refinance, charging excessive rates and fees to a borrower who qualifies for lower rates and/or fees offered by the lender, or imposing new unjustifiably harsh terms for rolling over existing debt.

Predation breaks the links between an economy's aggregate resource endowment and aggregate consumption and between the interpersonal distribution of endowments and the interpersonal distribution of consumption.

The choice by some to be predators decreases aggregate consumption, both because the predators' resources are wasted and because producers sacrifice production by allocating resources to guarding against predators. Much of welfare economics is based on the concept of pareto optimum, which asserts that resources are optimally distributed when an individual cannot move into a better position without putting someone else into a worse position. In an unjust global society, the pareto optimum will perpetuate injustice.

Why isn't the legal concept of lender liability applied to stop foreclosure of homes with young children? In the US, lender liability is embodied in common and statutory law covering a broad spectrum of claims surrounding predatory lending. If a lender knowingly lends to a borrower who is obviously unable to make reasonable beneficial gain from the use of the funds, or causes the borrower to assume responsibilities that are obviously beyond the borrower's capacity, the lender not only risks losing the loan without recourse but is also liable for the financial damage to the borrower caused by such loans.

For example, if a bank lends to a trust client who is a minor, or someone who had no business experience, to start a risky business that resulted in the loss not only of the loan but also the client trust account, the bank may well be required by the court to make whole the client.

The argument for home mortgage debt forgiveness contains large measures of concepts of lender liability and predatory lending. Debt securitization allows predatory bankers to pass the risk to global credit markets, socializing the potential damage after skimming off the privatized profits.

The housing bubble has been created largely by predatory lending without any lender liability. The argument for forgiving defaulted home mortgage debt is applicable to low- and moderate-income home mortgage borrowers in the US as well.

http://www.atimes.com/atimes/Global_.../LA26Dj04.html

[bill]

Re: Henry CK Liu on debt forgiveness

Delay, Delay, Delay principal washout. Keep the chain of payments going. Inflate, Inflate, Inflate.

http://www.nctimes.com/business/arti...44aa6941e.html

By ERIC WOLFF - ewolff@nctimes.com | Posted: Friday, January 22, 2010 1:30 pm | No Comments Posted

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Homeowners can now apply for a federally backed mortgage modification program before they get behind on mortgage payments, the Federal Housing Administration announced Friday.
A change in the rules will allow homeowners who experience a sudden loss of income or other financial distress to apply for a loan modification though the Housing Affordable Modification Program before they miss a payment. Previous rules only admitted homeowners who were at least 60 days behind.
"Now servicers will have additional options for those borrowers who seek help before they go delinquent, which increases the likelihood that the borrower will be able to retain their home," FHA Commissioner David Stevens said in a statement.
At least one local housing counselor was less optimistic.
"I think it opens the door up for a lot of homeowners who may not have been eligible before, but getting access to the program is still going to be difficult due to a lack of transparency on the decision-making process," said Ali Tarzi, a supervisor at Community Housing Works, a housing nonprofit.
Tarzi said his agency hasn't been able to get anyone into HAMP because the program is intended to be used as a last resort. He also said the program has strict requirements that cap the ratio of debt to household income at 55 percent.
"The 55 percent ratio tells a mortgage bank, if you're overextended in your financing, you can't make your payments no matter what," Tarzi said. "I don't understand how that's going to help the vast majority of the families."

[due_indigence]

Re: Henry CK Liu on debt forgiveness

Slowly, very slowly in the US, common law is rearing its ancient ugly head. The MERS system (essentially the database that serves as the chop-shop for 70% of the nation's mortgages and the fencing operation for the originate-and-distribute guys) is being challenged as the lender-of-record. Seems that niggling practice of registering deeds of trust at the local courthouse was more than a pain in the neck. And what about the millions in foregone recordation fees that MERS deprived the local governments?

The whole thing was a criminal enterprise where the Chinese served nicely as the greater fools. Now China knows it was receiving bogus title to stolen goods (what was the euphemism, securitization?) Those 4 million surplus homes built in America during the boom were built for a very good reason. They helped rationalize the Freddie and Fannie paper.

The Ponzi cannot be revived. There are no fools left.

[newnewthing]

Re: Henry CK Liu on debt forgiveness

But for whom. Henry at his most Hudson-esque....

Today, in 2010, as predatory capitalism hits its own home base, it is possible that a new world economic order will soon emerge from people power. Unfortunately, all governments are still fixated on "recovery" schemes concocted to turn the crisis back to the very same flawed system of moral depravity that had led the world to its present disastrous state.

Much of the talk now among establishment economists has been focused on technical debate on the government stimulus packages being too small to kick-start the seriously impaired economies around the world, when the problem has been that good public money has been targeted for bailing out undeserving private institutions to enable them to again play the same immoral game of recklessly speculation through "carry trade", risking the people's money for unproductive, obscene private profit, while leaving a dispirited population unemployed and underemployed, with families with young children facing homelessness.

If only a fraction of the people's money is spend directly on the people themselves, the world will emerge with a new economic order of moral justice instead of deprivation.

Ron Paul, the Republican congressman from Texas, told Federal Reserve chairman Ben Bernanke in a hearing that the Federal Reserve is a "predatory lender". But he did not mention that by law, predatory lenders forfeit any right of collection.

In the United States, although predatory lending is not defined by federal law, and various states define abusive lending differently, it usually involves practices that strip equity away from a homeowner, or equity from a company, or condemn the debtor into perpetual indenture.

Predatory or abusive lending practices can include making a loan to a borrower without regard to the borrower's ability to repay, repeatedly refinancing a loan within a short period of time and charging high points and fees with each refinance, charging excessive rates and fees to a borrower who qualifies for lower rates and/or fees offered by the lender, or imposing new unjustifiably harsh terms for rolling over existing debt.

Predation breaks the links between an economy's aggregate resource endowment and aggregate consumption and between the interpersonal distribution of endowments and the interpersonal distribution of consumption.

The choice by some to be predators decreases aggregate consumption, both because the predators' resources are wasted and because producers sacrifice production by allocating resources to guarding against predators. Much of welfare economics is based on the concept of pareto optimum, which asserts that resources are optimally distributed when an individual cannot move into a better position without putting someone else into a worse position. In an unjust global society, the pareto optimum will perpetuate injustice.

Why isn't the legal concept of lender liability applied to stop foreclosure of homes with young children? In the US, lender liability is embodied in common and statutory law covering a broad spectrum of claims surrounding predatory lending. If a lender knowingly lends to a borrower who is obviously unable to make reasonable beneficial gain from the use of the funds, or causes the borrower to assume responsibilities that are obviously beyond the borrower's capacity, the lender not only risks losing the loan without recourse but is also liable for the financial damage to the borrower caused by such loans.

For example, if a bank lends to a trust client who is a minor, or someone who had no business experience, to start a risky business that resulted in the loss not only of the loan but also the client trust account, the bank may well be required by the court to make whole the client.

The argument for home mortgage debt forgiveness contains large measures of concepts of lender liability and predatory lending. Debt securitization allows predatory bankers to pass the risk to global credit markets, socializing the potential damage after skimming off the privatized profits.

The housing bubble has been created largely by predatory lending without any lender liability. The argument for forgiving defaulted home mortgage debt is applicable to low- and moderate-income home mortgage borrowers in the US as well.

http://www.atimes.com/atimes/Global_.../LA26Dj04.html

Loans were not made without regard to ability to pay so much as made without verification. Stated income (aka Liars Loans) loans allowed the borrower to lie about their income to get a loan. The idea that they are entitled to keep a house and get their debts canceled as a result of their lies is absurd on its face.

What is more criminal is that some of the folks that made and securitized these loans were considered too big to fail and were bailed out. The home buyers were not

[rjwjr]

Re: Henry CK Liu on debt forgiveness

Ron Paul, the Republican congressman from Texas, told Federal Reserve chairman Ben Bernanke in a hearing that the Federal Reserve is a "predatory lender". But he did not mention that by law, predatory lenders forfeit any right of collection.

Predatory or abusive lending practices can include making a loan to a borrower without regard to the borrower's ability to repay, repeatedly refinancing a loan within a short period of time and charging high points and fees with each refinance, charging excessive rates and fees to a borrower who qualifies for lower rates and/or fees offered by the lender, or imposing new unjustifiably harsh terms for rolling over existing debt.

Why isn't the legal concept of lender liability applied to stop foreclosure of homes with young children? In the US, lender liability is embodied in common and statutory law covering a broad spectrum of claims surrounding predatory lending. If a lender knowingly lends to a borrower who is obviously unable to make reasonable beneficial gain from the use of the funds, or causes the borrower to assume responsibilities that are obviously beyond the borrower's capacity, the lender not only risks losing the loan without recourse but is also liable for the financial damage to the borrower caused by such loans.

For example, if a bank lends to a trust client who is a minor, or someone who had no business experience, to start a risky business that resulted in the loss not only of the loan but also the client trust account, the bank may well be required by the court to make whole the client.

The housing bubble has been created largely by predatory lending without any lender liability. The argument for forgiving defaulted home mortgage debt is applicable to low- and moderate-income home mortgage borrowers in the US as well.

But, wasn't it Congress that encouraged these practices in a misguided attempt to bring home ownership to all? How can those that make the laws, who then encouraged the banking/mortgage industry to break the laws, then step-in to hold said industry accountable/criminally liable? If Congress pursues such an action, the banks would seem to have a legitimate counter suit for entrapment or some such. Anyway, it's definitely a clusterf&%$, is a classic example of unintended consequences, and strengthens the argument for less government meddling.

Besides, they have yet to solve the important issues on their recent agenda, like trying to fix the NCAA football BCS vs playoff dispute. What the hell do they think we sent them to Washington for anyways if not to get us a football play-off?! What a bunch of small-minded representatives we have elected for ourselves (okay, okay...that the oligarchs have elected for us).

[don]

Re: Henry CK Liu on debt forgiveness

Slowly, very slowly in the US, common law is rearing its ancient ugly head. The MERS system (essentially the database that serves as the chop-shop for 70% of the nation's mortgages and the fencing operation for the originate-and-distribute guys) is being challenged as the lender-of-record. Seems that niggling practice of registering deeds of trust at the local courthouse was more than a pain in the neck. And what about the millions in foregone recordation fees that MERS deprived the local governments?

The whole thing was a criminal enterprise where the Chinese served nicely as the greater fools. Now China knows it was receiving bogus title to stolen goods (what was the euphemism, securitization?) Those 4 million surplus homes built in America during the boom were built for a very good reason. They helped rationalize the Freddie and Fannie paper.

The Ponzi cannot be revived. There are no fools left.

Another item of interest- which appeared only briefly on the radar screen- is the duplication of mortgages to swell the tranches, for what would amount to duplicate MBS. If that was widespread, as suspected, it goes a long way to answering the shadow inventory practices. Documentation would eventually surface as a prosecutable, even in these times :eek:, problemo for the Masters of the Universe.

[thriftyandboringinohio]

Re: Henry CK Liu on debt forgiveness

Loans were not made without regard to ability to pay so much as made without verification. Stated income (aka Liars Loans) loans allowed the borrower to lie about their income to get a loan. The idea that they are entitled to keep a house and get their debts canceled as a result of their lies is absurd on its face.

I beg to differ - "without regard for ability to pay" and "without verification" are the same thing, a distinction without a difference.

Any reasonable observer concludes the bank acted recklessly only because they knew full well they would immediately sell the loan. The bank was not loaning its own money in any practical way, so the bank participated in the "lie about their income" and certified it as true. It is not absurd on its face that the homeowner benefits; the bank benefited and is now 100% whole despite materially participating in fraud. That the homeowner walks away with a free house may be an effective deterrent against such willful corporate banking fraud.

[bcassill]

Re: Henry CK Liu on debt forgiveness

But, wasn't it Congress that encouraged these practices in a misguided attempt to bring home ownership to all? How can those that make the laws, who then encouraged the banking/mortgage industry to break the laws, then step-in to hold said industry accountable/criminally liable? If Congress pursues such an action, the banks would seem to have a legitimate counter suit for entrapment or some such. Anyway, it's definitely a clusterf&%$, is a classic example of unintended consequences, and strengthens the argument for less government meddling.

Besides, they have yet to solve the important issues on their recent agenda, like trying to fix the NCAA football BCS vs playoff dispute. What the hell do they think we sent them to Washington for anyways if not to get us a football play-off?! What a bunch of small-minded representatives we have elected for ourselves (okay, okay...that the oligarchs have elected for us).

The problem is that the TBTF and Wall Street knew exactly what they were doing when they packaged and resold this garbage through the "miracle" of securitization. Unfortunately, the garbage has landed on the balance sheet of Freddie, Fannie, and the Fed at the expense of the U.S. taxpayer. Sure, he government is complicit on many levels from keeping rates too low for too long to pushing for home ownership among those who couldn't otherwise afford it. Neither, however, excuses the gross fraud committed by the Wall Street crowd that you, I, and everyone else will be paying off for a very, very long time.

[newnewthing]

Re: Henry CK Liu on debt forgiveness

I beg to differ - "without regard for ability to pay" and "without verification" are the same thing, a distinction without a difference.

Any reasonable observer concludes the bank acted recklessly only because they knew full well they would immediately sell the loan. The bank was not loaning its own money in any practical way, so the bank participated in the "lie about their income" and certified it as true. It is not absurd on its face that the homeowner benefits; the bank benefited and is now 100% whole despite materially participating in fraud. That the homeowner walks away with a free house may be an effective deterrent against such willful corporate banking fraud.

When I apply for a loan I don't lie about my income and there is more than just a sense of honesty involved. Lying on a loan app is a felony. Banks don't prosecute felonies, governments do. And banks didn't "certify" fraudulently stated income. However, legions of intermediaries (mortgage brokers - and it was them that resold the loans, the banks generally got stuck with them) did as they steered borrowers telling them what their income "needed to be" to get a loan. The ones that did this should be prosecuted to the max and borrowers that fraudulently grossly overstated income on their own should not be rewarded with a free house.

Where was the government during all this? Congratulating themselves on making home ownership "affordable" to those that really couldn't afford it, raking in taxes on the income in the chain, and simply preferring to believe house prices would always go up and so the collateralized loan was safe. The alternative was unpleasant and hence was ignored. After all a war was on and government spending needed the income these activities produced. Or seemed to. The biggest believers in a Ponzi are those on the front end that are making money. Wall Street, the government, mortgage brokers, and the banks. The ratings agencies together with FICO (which provided quants a number to run regression on) yielded the magical financial ratings so that pension funds and assorted other "sophisticated investors" scarfed the dog food up.

It's all so obvious now.

[Master Shake]

Re: Henry CK Liu on debt forgiveness

The problem is that the TBTF and Wall Street knew exactly what they were doing when they packaged and resold this garbage through the "miracle" of securitization. Unfortunately, the garbage has landed on the balance sheet of Freddie, Fannie, and the Fed at the expense of the U.S. taxpayer. Sure, he government is complicit on many levels from keeping rates too low for too long to pushing for home ownership among those who couldn't otherwise afford it. Neither, however, excuses the gross fraud committed by the Wall Street crowd that you, I, and everyone else will be paying off for a very, very long time.

It doesn't excuse the gross fraud, but government policies also played a part in this clusterfuck.

[MulaMan]

Re: Henry CK Liu on debt forgiveness

No Doc loans are only a part of those going bankrupt, there where many other loan programs that did not require lying on loan apps that are going under.

Historical Debt to Income ratios where ignored by lenders because they where not taking the risk but punting it off to investors.

Option Arm loans now going bust where basically $1 million dollar credit cards given out by the banks to consumers.

It is utimately the banks and investors that should be on the hook. This stuff that it is the borrow's fault is complete Fox News hyper-spin.

You can't pay your mortgage, you walk away, your credit get dinged, the bank / lender takes the loss, not the tax payers.

The banks knew exactly what they were up to do. The banks / investors should all go under and executive earnings clawed back.

Many mortgage brokers should be in jail. Many real estate agents should be in jail. Contractors that use illegal Mexicans to build homes should be put in jail. The people on those "pimp this house" real estate TV shows should be executed just for the fun of it.

[newnewthing]

Re: Henry CK Liu on debt forgiveness

No Doc loans are only a part of those going bankrupt, there where many other loan programs that did not require lying on loan apps that are going under.

Historical Debt to Income ratios where ignored by lenders because they where not taking the risk but punting it off to investors.

Option Arm loans now going bust where basically $1 million dollar credit cards given out by the banks to consumers.

It is utimately the banks and investors that should be on the hook. This stuff that it is the borrow's fault is complete Fox News hyper-spin.

You can't pay your mortgage, you walk away, your credit get dinged, the bank / lender takes the loss, not the tax payers.

The banks knew exactly what they were up to do. The banks / investors should all go under and executive earnings clawed back.

Many mortgage brokers should be in jail. Many real estate agents should be in jail. Contractors that use illegal Mexicans to build homes should be put in jail. The people on those "pimp this house" real estate TV shows should be executed just for the fun of it.

Lol.

The proverbial House(s) of Cards.

And the collapse has hurt a lot of people that were fully doc'ed and bought houses that are now 40% under water even though they put down 20%. Not everyone doing financing in 2006 was flipping, or using their home as a large credit card. If these guys walk even conservative banks get screwed.

[medved]

Re: Henry CK Liu on debt forgiveness

The problem is that the TBTF and Wall Street knew exactly what they were doing when they packaged and resold this garbage through the "miracle" of securitization. Unfortunately, the garbage has landed on the balance sheet of Freddie, Fannie, and the Fed at the expense of the U.S. taxpayer. Sure, he government is complicit on many levels from keeping rates too low for too long to pushing for home ownership among those who couldn't otherwise afford it. Neither, however, excuses the gross fraud committed by the Wall Street crowd that you, I, and everyone else will be paying off for a very, very long time.

Poor Fannie, Freddie and Ginnie! They did not know!...

C'mon, they are just as guilty as Wall Street. The whole Fannie/Freddie/Ginnie clusterpack created by socialists is just another failed and corrupt gov't boondogle. Their CEOs are getting fat bonuses for screwing their shareholders and US taxpayers.

OTOH, they are not greedy capitalists but professional dogooders, so this is OK :rolleyes:

[flintlock]

Re: Henry CK Liu on debt forgiveness

Plenty of blame to go around. Bankers, Politicians, and Individuals. 3 wrongs don't make a right. Has it ever occurred to anyone that everyone involved is responsible? Actions have consequences.

Most of these bad loans were not liar loans were they?

[flintlock]

Re: Henry CK Liu on debt forgiveness

Lol.

The proverbial House(s) of Cards.

And the collapse has hurt a lot of people that were fully doc'ed and bought houses that are now 40% under water even though they put down 20%. Not everyone doing financing in 2006 was flipping, or using their home as a large credit card. If these guys walk even conservative banks get screwed.

True, many "innocent" got hurt in this mess. But at some point common sense has to come in to play for many. If you are a buyer 40% under water after putting 20% down then you were probably someone buying in one of the overheated markets like in FL, CA, or Vegas.. I remember telling my brother in 2006(?) not to buy in Florida . He'd just sold his home in South Florida for a huge gain after only one year there. I told him to use common sense. He sold a 2000 sq ft home of VERY mediocre construction that was 15+ miles from the city for almost $500k. The same price here in Atlanta might have been about $250k. It just didn't make sense to me to go right back and buy into that kind of market. Supply, Demand, whatever.:rolleyes: Live somewhere else or rent. Luckily he decided to rent for a few years and was able to skip away from FL scott free( with the cash from his previous sale) when his wife's company imploded.

Of course some people felt compelled to buy in these super hot RE areas for valid reasons, but I'd venture to guess more than a few did so because they were afraid they'd miss the boat on all that "appreciation". The bottom falling out of housing came as no surprise to anyone with long term experience in real estate. It was not a matter of "if" but rather "when". I knew the crash was imminent when I saw a house flipping show where some 20 year old punk was flipping homes with his homeboys.